While they have been around even before the pandemic, digital wallets rose in popularity, especially during all those lockdowns. As more and more businesses shift to online transactions, the need to have your own digital wallet seems to be more crucial today.
The question is: How safe are they? With scams and stories of identity theft seeming to happen left and right, can you really trust digital wallets to keep your data safe from hackers and the damages they can cause?
We use digital wallets too and wanted to ensure that our money and information are safe. And this article is the result of our deep research into how digital wallets secure our data.
In this article, we give you a few tips to improve the security of your digital wallet, as well as some factors to consider before you choose one.
We looked at the official sites of different digital wallets and examined how they work and what their security measures are. We also read dozens of reviews from users on independent sites, as well as examined the news about security breaches digital wallets might have experienced in the past.
The last thing you want is to go with a digital wallet only to find out that it’s not the right one for you. Keep reading until the very end to find out the most crucial factor to consider when choosing your digital wallet.
How do digital wallets work?
A digital wallet is a service that allows you to store your payment information (credit cards, debit cards, loyalty cards, etc.) in an online account.
This gives you the ability to make purchases online, in-app, and in physical stores by using your phone or another connected device instead of carrying around a physical wallet.
Some digital wallets also allow you to send and receive money from other users, similar to Venmo or Paypal. And some can be linked to investment accounts so you can buy and sell stocks and cryptocurrency.
When you want to make a purchase, you simply open up your digital wallet and enter the required information. The funds are then transferred from your account to the merchant’s account.
Depending on the service, you may also be able to link your loyalty cards and store coupons in your digital wallet so you can have all of your information in one place.
What makes digital wallets safe?
When you entrust your personal financial information to a digital wallet company, you expect that it will be kept safe and secure. Fortunately, these companies take data security very seriously and use a variety of measures to protect your information.
Encryption
For one, most digital wallet companies encrypt all of their data using the latest security technologies. This means that your data is turned into a code that only authorized individuals can read.
The length and strength of the encryption key they use can vary, but it’s generally quite difficult for anyone who isn’t authorized to access your data to decode it.
Two-factor authentication
This means that you not only need a password to access your account, but you also need a second piece of information, such as a code sent to your phone or a fingerprint scan.
This makes it much more difficult for someone who doesn’t have a physical device to access your account.
Transaction records
Most digital wallet companies keep a record of all the transactions you make through their system. This provides a valuable auditing trail in the event of any suspicious activity.
Third-party security
Finally, they often partner with trusted third-party security providers to help keep their systems secure. These companies act as consultants who help strengthen the security of digital wallet platforms.
Tips for keeping your digital wallet safe and secure
In addition to the security measures digital wallet companies put in place, there are also some things you can do to protect your account.
- Choose a strong password
This should go without saying, but it’s important to choose a strong, unique password for your digital wallet account. Avoid using easily guessed words or sequences, and don’t reuse passwords from other accounts.
- Enable two-factor authentication
As we mentioned before, two-factor authentication is an important security measure that can help protect your account. If it’s available, be sure to enable it.
- Keep your software up to date
Another good way to protect your account is to keep your operating system and apps up to date. Digital wallet companies frequently release updates with new security features and bug fixes.
By keeping your software up to date, you can help ensure that you’re always taking advantage of the latest security measures.
- Watch out for phishing scams
Phishing scams are a common type of attack where criminals attempt to trick you into giving them your login information. They may do this by sending you an email or text message that looks like it’s from the digital wallet company but is actually from a fake website.
To protect yourself, never click on links or enter your login information into a website unless you’re absolutely sure it’s legitimate. You can usually check this by looking at the URL; if it’s not exactly the same as the digital wallet company’s website, it’s probably a fake.
- Install security apps
If you’re using a mobile digital wallet, consider installing a security app like Lookout or Norton Mobile Security. These apps can help protect your device from malware and other threats.
- Track your finances
Keep an eye on your account statements and watch for any suspicious activity. If you see anything that looks unusual, contact the digital wallet company right away.
- Keep your phone physically safe
This one is pretty simple: don’t lose your phone! If your phone is lost or stolen, someone could access your digital wallet account and use it to make unauthorized purchases.
It also helps to set a password or PIN code on your phone so that only you can access it. This will help prevent someone from being able to access your digital wallet if they find or steal your phone.
- Download only trusted and verified apps
When you’re looking for a digital wallet app, be sure to download only apps that trusted sources like the Apple App Store or the Google Play Store have verified.
- Avoid public Wi-Fi
If you really must access your digital wallet on a public Wi-Fi network, be sure to use a VPN to protect your data. Otherwise, just look for another way to open your digital wallet.
What to do if your device is stolen or lost
If your phone is lost or stolen, the first thing you should do is contact the digital wallet company and let them know. They’ll usually be able to disable your account so that it can’t be used by anyone else.
You should also contact your wireless carrier and let them know that your phone has been lost or stolen. They may be able to block your device so that it can’t be used on their network.
Finally, you should report the loss or theft to the police. This will help create a paper trail in case you need to file an insurance claim or take legal action against the person who stole your phone.
Benefits and risks of a digital wallet and mobile payment app
There are a few things to consider before you start using a digital wallet or mobile payment app. Let’s take a look at some of the benefits and risks of these technologies:
Benefits
| Convenience: Mobile payment apps make it easy and convenient to pay for things without having to carry cash or a physical credit card. |
| Rewards and discounts: Some digital wallets offer rewards and discounts when you use them to make purchases. |
| Protection from fraud: When you use a credit card with a digital wallet, your information is encrypted, which can help protect you from fraud. |
Risks
| Loss or theft of device: If your phone is lost or stolen, someone could access your digital wallet and use it to make unauthorized purchases. |
| Data breaches: If the company that provides your digital wallet is hacked, your personal and financial information could be compromised. |
| Phishing scams: Be sure to watch out for phishing scams, where criminals attempt to trick you into giving them your login information. |
Factors to consider when choosing a digital wallet
When you’re looking for a digital wallet, here are a few factors to consider:
| Ease of use | Is the digital wallet easy to use? Can you easily add and remove funds? |
| Fees | Does the digital wallet charge any fees? How much do they charge for the different transactions they have? |
| Compatibility | Is the digital wallet compatible with your devices and apps? |
| Rewards and discounts | Does the digital wallet offer any rewards or discounts? |
PRO TIP
When choosing a digital wallet, the biggest factor to consider is security. How does this digital wallet secure your information? What measures do they have in place to prevent hackers from accessing your data? What will they do if the worst happens and a hacker is able to gain access to your digital wallet?
Before deciding on any digital wallet, make sure that you’re able to answer all of these questions so you don’t end up regretting your choice later on.
Reputable digital wallets to check out
Now that we know how digital wallets work, let’s take a look at the security features offered by some of the most popular services.
Apple Pay
Apple Pay uses a combination of Touch ID (fingerprint scanning) and Face ID (facial recognition) to verify your identity before allowing a transaction to take place. Your credit card information is also encrypted and stored on a secure chip inside your iPhone or Apple Watch.
Google Pay
Google Pay uses a similar security system, with the added option of a PIN code. Google also uses what’s called ‘tokenization’ to keep your payment information secure. This means that your actual credit card number is never stored on your device or shared with merchants.
Instead, a unique token is generated and used in its place. If your device is lost or stolen, you can disable the token so it can’t be used to make unauthorized purchases.
Samsung Pay
Samsung Pay uses both fingerprint scanning and iris scanning for verification, as well as advanced encryption to keep your information safe. You can also set up Samsung Pay to require a PIN code for every transaction.
Conclusion
In general, yes, digital wallets are safe to use. Most of these companies take extra steps to ensure the security of your personal information, and they constantly release new updates to protect your data from the increasingly more sophisticated attacks of hackers.
Digital wallets and mobile payment apps offer a convenient way to pay for things without having to carry cash or a physical credit card. However, it’s equally important that you be aware of the risks before you start using these services.
Before you decide to sign up for a particular digital wallet, always remember that security should be your number one consideration. The platform you choose should have enough measures in place to ensure that your data is safe from hackers, and it should have a clear plan of action should hackers be able to access your information.